Heading into the end of the year dips will be shallow and will be bought.
I have noticed more people becoming bearish or cautious recently. For me, the latter makes more sense. I think last week was very constructive, but does warrant a bit more caution. Having said that, I’m not seeing evidence yet of a reason to go short (unless for a quick scalp). Last week was an inside week, the lowest print being 1752.70. For reference, the lowest print for the week prior was 1740.52. It only took a little over three weeks to get from 1646 to where we are now and last week doesn’t really account for any of that move. A pause while we digest those gains is bullish and so far that is what we are seeing. I would not be surprised to see 1740 tested soon or even a bit lower, but I think if we hold it on a closing basis then that is a good sign that we are digesting gains through time rather than price.
For next week key near term support levels are 1752, 1740, and 1734. If those fail I think it would be signaling a larger pull-back, maybe to the 1700 area. On the upside we have 1775.22 (1772.09 on a closing basis) as resistance.
Open Interest: The following are weekly graphs all expiring Friday November 8th.
SPY: If it doesn’t move all week it would pin perfect, but with five days ahead of us I’m sure we will see some changes. Sentiment seems fairly split based just on this open interest.
AAPL: Goes ex-dividend Wednsesday so this open interest will change.
AMZN: Not such a great end to the week, but holding its earnings gain well. Unless it gets into the gap, allowing the MA’s to catch up is constructive. The gap also coincides with high open interest puts around 350, which should help keep it supported (and a good place to go long if it gets there).
CMG: Likes to take its sweet time when consolidating. Not typical to see more calls than puts. The longer it takes to close over 530 next week the more difficult it will become.
GOOG: Highest open interest calls 1,030. Highest open interest puts 1,010. Definitely appears as if it going much higher into year end.